The Bank of Japan's decision to maintain negative interest rates has prompted US hedge fund firm Capstone Investment Advisors to increase its allocation of risk capital to the country to record levels in the hope that the central bank is creating uncertainties that may benefit its volatility trading strategy.
The Bank of Japan's decision to maintain negative interest rates has prompted US hedge fund firm Capstone Investment Advisors to increase its allocation of risk capital to the country to record levels in the hope that the central bank is creating uncertainties that may benefit its volatility trading strategy.
The report quotes Capstone CEO Paul Britton as saying in an interview in Tokyo, that Japan's interest rate policy "just creates volatility as investors question what the BOJ is going to do”.
Capstone opened its first Asia office in Hong Kong last year, and according to Britton, the $10.8 billion firm has plans to allocate $1.5 billion of risk capital to the region by mid-2024. Japan will provide the biggest exposure in Asia and will likely continue to be the fund’s largest allocation in the region for the next 12 to 24 months, he added.
In the longer term though, Britton believes greater opportunities will be found in China, where efforts to open up financial markets while protecting the country's heritage and domestic businesses may prove to be a major driver of volatility in the next five to 10 years.
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